Telecoms deal making slows with downturn

Peter Dinham
Monday, 27 April 2009 20:13

Business IT - Technology

Wheeling and dealing in the telecoms market has been dampened by the global economic downturn, with valuations depressed and mergers and acquisitions deferred in a climate of uncertainty.

According to a new study released today by analysts, Ovum, while the financial market turmoil saw some deals accelerated, uncertainty has dominated the market of late, even though the financial health of telcos is stronger than several years ago.

However, according to Ovum, in some large markets  - including Australia, China, the US and Germany - governments are helping their telcos get through the downturn, with “direct subsidy, tax breaks, and so on, aimed at offsetting the recession’s impact on telecom’s fortunes.”

In the fourth quarter last year, Ovum reports that the number of mergers & acquisition deals done dropped by 63 to 129 compared to 192 in the fourth quarter of 2007, while there were only four deals  valued above US$1 billion in 4Q08 compared to 10 in 2007.

Matt Walker, Ovum principal analyst, also reports that public stock offerings dried up, from 14 deals in 4Q07, to just two offers in 4Q08, both of which were from carriers based in the “relatively robust Middle East & Africa region.”

Walker says private placements also fell, from 25 deals in 4Q07 to just six announced in 4Q08, which included five small placements, and a large one in Asia Pacific, which was Telenor’s $1.2 billion for a 60% stake in India’s Unitech Wireless.

Also flat, according to Walker, was venture financing year-over-year in 4Q08 (deal count and value), with most funds targeting US-based vendor start-ups.
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